UPDATE 26/07 - Shell has withdrawn its threat to lock out workers.

ORIGINAL 25/07 - Shell says it will stop paying workers at its Prelude floating liquefied natural gas (FLNG) facility if they continue industrial action. 

The Offshore Alliance - a combined union for Prelude workers - has extended protected industrial action, which began 40 days ago, to August 4. 

The industrial action forced the temporary shutdown of the facility earlier this month. Shell says it has started shutting down the 3.6 million tonne per year FLNG unit and will not be able to supply customers with LNG if the strike action continues.

The company has warned that any workers who remain on site but are involved in the industrial action will only be paid for periods when they work.

“We will be resorting to lock outs as the mechanism available under the Fair Work Act,” a Shell spokesperson said late last week. 

“Once the lock outs are in effect people will no longer be paid if they are not mobilised to the facility.”

The dispute between Shell and the Offshore Alliance - which is composed of the Australian Workers' Union (AWU) and Maritime Union of Australia (MUA) - has been going on for months, with the most recent enterprise bargaining agreement proposed by Shell being voted down by 95 per cent of striking Prelude workers. Shell has reportedly refused to bargain since workers rejected the offer.

Union members at the facility say they are seeking better pay and working conditions, and have engaged in ‘bans’ to back their negotiations, including not unloading cargo at certain times. 

Tensions flared in recent weeks after contractors who were to fly out to the rig were stood down before they could go.

The facility has also been plagued by technical issues in its short working life, having temporarily shut down last year after a fire.

Shell and the Offshore Alliance both blame each other for the dispute.

The Offshore Alliance says recent pay deals with Japan’s Inpex are the new benchmark for talks with other oil and gas majors, including Chevron at its Wheatstone platform.

Inpex recently agreed to base rates of pay from $125,000 to $258,000 plus allowances, up from between $92,000 and $102,000.

Shell reportedly offered its unionised workforce a pay raise of $20,000 on top of their average current salary of $140,000, but the union is pushing for job security guarantees in order to prevent Shell from outsourcing work to contractors.

Prelude is the world’s largest FLNG facility, and is co-owned by Shell, Inpex, Korea Gas Corp (KOGAS) and a subsidiary of Taiwan’s state-run Chinese Petroleum Corp (CPC).